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CORPORATIONS MAY CONSOLIDATE_PUBLICATION OF NO

TICE-COPY TO BE FILED. Sec. 473, C. C. Any railroad corporation incorporated under the laws of this state may consolidate with one or more railroad corporations incorporated under the laws of this state, or under the laws of any other state or territory of the United States, its capital stock, properties, roads, equipments, adjuncts, franchises, claims,, demands, contracts, agreements, obligations, debts, liabilities and assets of every kind and description, upon such terms and in such manner as may be agreed upon by their respective boards of directors; provided, no such consolidation shall take effect until the same shall have been ratified and confirmed in writing by stockholders of the respective corporations representing three-fourths of the subscribed capital stock of their respective corporations. In case of such consolidation "articles of incorporation and consolidation" must be prepared, setting forth: First, the name of the new corporation; second, the purpose for which it is formed; third, the place where its principal business is to be transacted; fourth, the term for which it is to exist, which shall not exceed fifty years; fifth, the number of its directors (which shall not be less than five nor more than thirteen) and the names and residences of the persons appointed to act as such until their successors are elected and qualified; sixth, the amount of its capital stock (which shall not exceed the amount actually required for the purposes of the new corporation, as estimated by competent engineers), and the number of shares into which it is divided; seventh, the amount of stock actually subscribed, and by whom; eighth, the termini of its road or roads and branches; ninth, the estimated length of its road or roads and branches; tenth, the names of the constituent corporations, and the terms and conditions of consolidation in full. Said articles of incorporation and consolidation must be signed and counter. signed by the presidents and secretaries of the several constituent corporations, and sealed with their corporate seals. There must be annexed thereto memoranda of the ratification and confirmation thereof by the stockholders of each constituent corporation, which must be respectively signed by stockholders representing at least three-fourths of the capital stock of their respective corporations. When completed as aforesaid, said articles must be filed in the office of the county clerk of the county in which the original articles of incorporation of either of the consolidating corporations are filed, and a copy of the articles of incorporation and consolidation certified by such county clerk must be filed in the office of the Secretary of State, and thereupon the constituent corporations named therein must be deemed and held to have become extinct in all courts and places, and said new corporation must be deemed and held in all courts and places to have succeeded to all their several capital stocks, properties, roads, equipments, adjuncts, franchises, claims, demands, contracts, agreements, assets, choses and rights in action of every kind and description, both at law and in equity; and to be entitled to possess, enjoy, and enforce the same and every thereof, as fully and completely as either and every of its constituents might have done had no conEolidation taken place. Said consolidated or new corporation must also, in all courts and places, be deemed and held to have become subrogated to its several constituents and each thereof, in respect to all their contracts and agreements with other parties, and all their debts, obligations, and liabilities, of every kind and nature, to any persons, corporations, or bodies politic, whomsoever, or whatsoever, and said new corporation must sue and be sued in its own name in any and every case in which any or either of its constituents might have sued or might have been sued at law or in equity had no such consolidation been made. Nothing in this section contained shall be construed to impair the obligation of any contract to which any of such constituents were parties at the date of such consolidation. All such contracts may be enforced by action or suit, as the case may be, against the consolidated corporation, and satisfaction obtained out of the property which, at the date of the consolidation, belonged to the constituent which was a party to the contract in action or suit, as well as out of any

other

property belonging to the consolidated corporation. En. March 21, 1872. Amd. 1900-01, 327.

Legislative History.

Section 40 of the railroad act of 1861, page 622, is the basis of this section. The original section is as follows:

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Two or more railroad corporations may consolidate their capital stock, debts, property, assets, and franchises in such manner as may be agreed upon by their respective boards of directors. No such amalgamation must take place without the written consent of the holders of three-fourths in value of all the stock of each corporation; and no such amalgamation or consolidation must in any way relieve such corporation or the stockholders thereof from any and all just liabilities. In case of such amalgamation or consolidation, due notice of the same must be given, by advertisement for one month in at least one newspaper in each county, if there be one published therein, into or through which such' roads run, and also for the same length of time in one paper published in Sacramento and two papers published in San Francisco; and when the consolidation and amal. gamation is completed, a copy of the new articles of incorporation must be filed in the office of the Secretary of State."

Section Cited.

Cal. So. R. R. v. S. P. R. R., 67 Cal. 61, 7 Pac. 123; Cal. etc. Co. v. Hooper, 76 Cal. 405, 407, 18 Pac. 599; Smith v. Los. Angeles etc. Ry. Co., 98 Cal. 216, 33 Pac. 53; Market St. Ry. Co. v. Hellman, 109 Cal. 577, 583, 584, 586, 593, 601, 42 Pac. 225; Murphy v. Pacific Bank, 119 Cal. 343, 51 Pac. 317.

Annotation.

Construction of Section Prior to Code: Stats. 1861, p. 622.

Articles of Consolidation.-Certified copies from the office of the Secretary of State of the articles consolidating two or more railroads are admissible in evidence to prove such consolidation. (Vance y. Kohlberg, 50 Cal 346.)

Under section 40 of the act of 1861, as under this section of the Civil Code, it is intended that the articles of consolidation-themselves constituting the new articles of incorporation-shall be filed, and the persons named therein to act as directors until their successors shall be elected in the manner provided in the by-laws were properly named as directors. (Cal. S. R. R. v. S. P. R. R., 67 Cal. 59, 7 Pac. 123. To same effect: Cal. etc. Co. v. Hooper, 76 Cal. 406, IS Pac. 599; Market St. Co. v. Hellman, 109 Cal. 587, 42 Pac. 225.)

Construction of this Section.—The provision of the Civil Code in relation to the consolidation of railroad corporations apply equally to corporations formed and existing before and after the adoption of such code. (Market St. Ry. Co. v. Hellman, 109 Cal, 571, 42 Pac. 225.

Consent of Stockholders to Consolidation. Under the California ('onstitution the right to consolidate without the unanimous consent of the stockholders exists. (Market St. Ry. Co. v. Hellman, 109 Cal, 571, 42 Pac. 225.)

And this section does not require an agreement upon a plan of consolidation, but simply upon the consolidation and a consent in writing of the holders of three-fourths in value of all the stock in each corporation to the consolidation “in such manner as may be agreed upon by the respective boards of directors of said companies,” is sufficient. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)

In determining majorities where action in corporate meetings or assent of stockholders is involved, the term “stock” means the subscribed, issned, outstanding shares that can be voted, and the consent of the holders of three-fourths in value of the capital stock means three-fourths of the "outstanding” stock. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)

A corporation which is a stockholder in a consolidated corporation may authorize its secretary to vote its stock, and where a portion of its stock stood on the books of the company in the names of the pledgees who authorized the stock to be voted by proxy, it may ratify and confirm the acts of the proxy, and such ratification is equivo alent to previous authority. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)

Where the trustees of stock consented to the consolidation of the corporation prior to the cancellation of the certificates held by them in trust, it is immaterial that the stock so held in trust by them was subsequently canceled. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)

Notice of Consolidation.-A publication in every issue of a paper from October 18th to November 17th, both days inclusive, is a publication for one month as provided in section 473 of the Civil Code. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)

A notice of consolidation of corporations, stating in substance that pursuant to statute, the several constituent corporations, naming them, upon the written consent of the stockholders holding more than three-fourths in value of all the stock of each of said corporations, and by agreement of the respective boards of directors of said corporations made and entered in accordance with such consent, and pursuant to the statute, have consolidated and amalgamated their capital stock, debts, property, assets and franchises, under a speci. fied corporate name and style is sufficient notice of consolidation. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)

Indebtedness of Constituent Companies.- Bonds of the constituent corporations are not, strictly speaking, obligations of the consolidated corporation, but it may agree with the constituent corporations to assume and pay the bonded indebtedness, and may provide for the payment of such bonds by the issuance of its own bonds. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225.)

There can be no novation of the indebtedness of the constituent corporations without the consent of the creditors of those corporations; but where the consolidated corporation has assumed the lia. bilities of the several constituent corporations, the creditors may elect to have recourse against the consolidated company and to recover against it. (Market St. Ry. Co. v. Hellman, 109 Cal. 571, 42 Fac. 225. See note: Austin v. Bank, 59 Am. St. Rep. 557.)

Consolidation does not relieve either of the consolidating companies from its liabilities. The consolidated company may assume and make itself liable for the antecedent liabilities of the consolidating companies. Such agreement does not bind creditors, yet suit brought by a creditor upon a demand so assumed against the corporation assuming it is of itself sufficient evidence of the acceptance of the new obligation in lieu of the old. (Morgan v. Overman 8. M. Co., 37 Cal. 534; Smith v. Los Angeles etc. Ry. Co., 98 Cal. 216, 33 Pac. 53.)

STATE LANDS GRANTED FOR USE OF CORPORATIONS.

Sec. 474, C. C. There is granted to every railroad corporation the right of way for the location, construction and maintenance of their necessary works, and for every necessary adjunct thereto, over any swamp, overflowed, or other public lands of the state not otherwise disposed of or in use, not in any case exceeding in length or width that which is necessary for the construction of such works and adjuncts, or for the protection thereof, not in any case to exceed two hundred feet in width. En. March 21, 1872.

Legislative History,

This and the following section of the chapter are based on sections 20, 21 and 22 of the railroad act of 1861, pages 617, 618.

For Interpretation of this act, see Fox v. N. P. R. R. Co., 35 Cal. 542.

GRANT NOT TO EMBRACE TOWN LOTS.

Sec. 475, C. C. The grants mentioned in the preceding section do not apply to public lands of the state within the corporate limits of towns and cities, or within three miles thereof. En. March 21, 1872.

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